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October 11, 2013

[Yet Singh and his party’s potential next leader, Rahul Gandhi, usually discuss governance as if someone else were in charge; rather than address public grievances about corruption, they prefer to change the subject. Last October, Singh told a gathering of legal officials that “the mindless atmosphere of negativity and pessimism that is sought to be created over the issue of corruption can do us no good. It can only damage our nation’s image and hit at the morale of the executive.” Shrugging off concerns over budgetary profligacy, the alliance tabled the National Food Security Ordinance, a welfare program that subsidizes grain prices for the poor. The government has not been able to say how much the new program will cost; estimates put it at $20 billion annually, with no sunset clause. If the public has received any message at all in this shambles, it is that the government is either incompetent or not to be trusted.]

India’s prosperous future has
hardly ever seemed farther away than it does today. The country’s ongoing
economic crisis has darkened the atmosphere - and done so in a way tragically
familiar to most Indians. There is a feeling of déjà vu among the public, a
creeping sense that the country is adrift and sliding back to the economic,
political, and cultural dysfunctions of its very recent past; Indians are
beginning to doubt that their country has such a bright future after all. And
as long as that remains the case, India’s vast potential will remain just that.

It wasn’t so long ago that
Indians were saddled with an economic system that imposed on them burdensome
regulations and an opaque system of pricing, as well as a political system that
failed to guarantee their civil rights and restricted their freedom of expression.
For most of India’s history, the state and the public harbored mutual
suspicions about each other’s intentions - a dynamic that would periodically
worsen during economic crises. Indians often doubted their government’s ability
to master whatever crisis the country was presently struggling with, and they
acted accordingly.

Consider the Gold Control Act,
a 1962 law that banned trading gold and required Indians to notify the
government of their gold holdings. Gold has long played an outsized role in the
Indian economy - Indians acquired over 14 percent of all gold produced globally
between 1493 and 1930. In the face of massive foreign debt in the early 1960s,
the Gold Control Act was designed to prevent capital flight.

But the policy only motivated
Indians to trade gold more frantically on the black market, within India and
abroad. The New York Times reported at the time that “a handful of smugglers”
dominated the trade; the paper estimated that only one in every eight “gold
boats” - illegal shipments that left Dubai for India’s western coast - was
intercepted by Indian authorities. In later years, when the Indian government
imposed high import tariffs to protect local industries, Indians again found
ways around the policy. Indians living abroad in the Middle East and elsewhere
responded to the demand for basic goods of decent quality - everything from
nail clippers to scissors to handkerchiefs - by flying the products home in
suitcases. Residents paid top rupee for their wares.

As the Indian economy boomed
over the past 20 years, the state liberalized its approach to the economy, and
the mistrust between it and the public began to subside. But the old cynicism
is now rearing its head in the face of an economic slowdown triggered by the
U.S. Federal Reserve’s decision to curtail its quantitative easing monetary
policy, which has led to an explosion of the country’s account deficit. The
government has responded, in some cases, by bringing back policies reminiscent
of those from 50 years ago, including a focus on coercively controlling the
supply of gold in the country. The current finance minister, Palaniappan
Chidambaram, recently suggested that the national deficit could be tamed if
gold imports were halted for a year. He has already raised tariffs on gold to
ten percent, and required importers to set aside a fifth of all their gold for
export. Chidambaram has also said that he is considering imposing restrictions
on the purchase of “inessential” goods, such as consumer electronics, from
abroad. Once again, Indians have responded by turning to smugglers and
underground markets. Already there have been headlines about the seizure of
gold at India’s borders, and it has become impossible to estimate the volume of
illegal gold circulating in the country.

This dysfunction is caused in
part by an unfortunate convergence of economic trends, but also in part by
India’s crumbling political leadership. The United Progressive Alliance, a
fragile coalition led by Prime Minister Manmohan Singh since 2004, has been embroiled
in a breathtakingly long list of scandals involving defense and land deals and
the auction of coal reserves. Official files related to those auctions - a
matter currently under investigation - recently went missing; these are
especially pertinent given that Singh headed the coal ministry during the
auction. Even more recently, the alliance pushed through an ordinance to
protect lawmakers from criminal charges -- a dispensation that applies to fully
a third of the parliamentarians in India’s lower house.

Yet Singh and his party’s
potential next leader, Rahul Gandhi, usually discuss governance as if someone
else were in charge; rather than address public grievances about corruption,
they prefer to change the subject. Last October, Singh told a gathering of
legal officials that “the mindless atmosphere of negativity and pessimism that
is sought to be created over the issue of corruption can do us no good. It can
only damage our nation’s image and hit at the morale of the executive.”
Shrugging off concerns over budgetary profligacy, the alliance tabled the
National Food Security Ordinance, a welfare program that subsidizes grain
prices for the poor. The government has not been able to say how much the new
program will cost; estimates put it at $20 billion annually, with no sunset
clause. If the public has received any message at all in this shambles, it is
that the government is either incompetent or not to be trusted.

The concerns are not just
economic. Governmental decision-making, in the wake of several scandals, has
come to an abrupt halt. Six years ago, parliament passed 32 bills; this year,
disturbed by clamorous opposition in parliament, it has passed only two.
Meanwhile, it applies the law selectively, allowing the well-connected to
escape punishment, and important legislation is routinely passed with almost no
discussion. Restrictions have also been placed on civil rights; libel and
defamation laws have become unsettlingly wide. Indeed, national newspapers and
magazines, far from serving as a powerful fourth estate, are now commonly
viewed as subservient to members of the government. The government seems to
even be considering exerting more formal control over a press in sore need of
capital: the minister of information and broadcasting recently put forward the
idea that journalism, like law or medicine, should require an exam to assess
competency. This would be an especially foreboding precedent: since Indira
Gandhi evoked emergency laws in 1974, the media has generally been free to cast
a critical eye on the government.

Unsurprisingly, conspiracy
theories have been running rampant. According to one popular hunch currently
making the rounds, the ruling Congress party allowed the value of the currency
to fall before next year’s national election so that it could leverage more
value from the illegal dollar-denominated slush funds it is suspected of
holding abroad. And no one comes in for more grief than Sonia Gandhi - the
reclusive but influential president of the Congress party - who is suspected, by
the right, of being an agent of the Vatican. (Gandhi is an Italian Catholic by
birth.)

To quell the growing discontent
among the public, Indian leaders have issued assurances and reassurances abroad
and at home that all is well, or that all will soon be well. Perhaps this is
true: it is probably only a matter of time until the economy improves. But
Indians are not inclined to accept the government’s assurances - and that is
precisely what will forestall a more robust recovery. Unless their relationship
with their own elected representatives experiences some sort of fundamental
change, they will continue to cast a wary eye on the government’s intentions
and their commitment to any reform efforts will remain halfhearted. It is not
that Indians have entirely stopped dreaming of a glorious future. But they do
feel trapped, at least for now, by their considerably more humbling past.